Credit query

Q: Every month my husband and I pay off our credit card. But with the mortgage increases, would it be more beneficial for us to just use cash instead of a credit card?

Shawnnita Fairbairn, Moranbah, Q

A: Credit cards can be more convenient than cash for big purchases, such as petrol and grocery bills. If you're really disciplined and wipe out your debt each month, you won't have to pay any interest, so higher interest rates are irrelevant.

But if you're worried increases in your mortgage repayments will eat into your budget and you may not be able to pay your credit card in full, then cut back your spending on the plastic and use cash when possible. That way you're only using money you've already earned. Keep your credit card hidden in your wallet and use it just for emergencies.

Money to retire on

Q: My husband and I are in our 50s. We own a home valued at $500,000 and a townhouse valued at $340,000. We want to retire on the NSW south coast in a few years. Should we use the townhouse money to buy a retirement property or invest in a super fund?

Maureen, NSW

A: I can't give you specific advice on what you should do with the money from your townhouse sale because I don't have all your details, so you should visit a licensed financial planner. But I can tell you that shares have historically outperformed property in the long term. Hard to believe, I know!

Investing in the stock market through a super fund gives you the chance to make good gains but also exposes you to losses. All funds have different levels of risk, so you need to choose one that meets your goals. But remember, the stock market has been volatile for the past six months and many funds have lost money this financial year. SuperRatings tracks Australia's major super funds and says the median fund lost five per cent in January alone.

Do some research before deciding to purchase a property on the south coast. Narrow down where you want to live and find out how much property prices have risen over the past year. Spend six months following sales and going to auctions to get a good idea of value. Don't rush into a purchase - it's your retirement home, so you want it to be perfect and the right price.

For more finance advice from David Koch, check out the latest issue of New Idea - on sale now!